Citibanks’ Fourth Quarter Report on Law Firm Profitability: Bleak, But, on the Bright Side, That’s As Good As It Gets

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Citibank’s 2012 year-end report on law firm profitability tells us that 2012 was the Dickensian best of times and the worst of times. Only more worst than best.

It was the best of times because law firms reported a marginally insignificant increase in revenues and profitability. It was the worst of times because even as revenues and profits increased, expenses rose at three times the rate of increase for profits even as law firm managers fruitlessly sought to stem the tide of increasing expenses. It was the worst of times because the increased level of revenues and profits were attained by slogging accounts receivable and squeezing blood from rocks, reducing firms’ inventory of A/R, leaving them slightly limping as they gird to meet the challenges of 2012. It was the worst of times as realizations dipped and average annual hours billed dipped to 1.642, setting the stage for another round of layoffs.

But, ever looking for the silver lining, Citibank tells us that 2012 was ”not a bad year and we suspect likely to be the new definition of a good year for the legal industry at least for the foreseeable future.” Is that as good as it gets?

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Jerome Kowalski
Kowalski & Associates

Jerry Kowalski is the founder of Kowalski & Associates, which provides law firm management... View Profile »


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